by Mr. V. GOPALAKRISHNAN, MONEY AVENUES
Samvat 2071 has begun a positive note with Nifty regaining the 8000
mark. And if just one word is to be used to describe the market between last
samvat & this one, it’s Incredible, to say the least.
Samvat 2070 too started on a buoyant note after the despondent market
& economic conditions between May –- August last year, when the fears of
Federal Reserve’s taper talks triggered a massive sell off in the markets
leading to Rupee crashing to all time lows against the Dollar.
Current Account Deficit (CAD) slipped to historic lows. Government’s
handling of economic crisis left the investors, both domestic and
international, exasperated. Economic fundamentals were at multi year lows, with
inflation threatening to snowball into a major economic challenge.
New RBI Governor Dr. Raghuram Rajan calmed down the markets through
series of monetary measures aimed at reviving rupee and controlling Current
account deficit. For the first time,
Gold was put on the import black list.
On the political front, India was staring at a government change and
landmark election in May 2014 and Narendra Modi had already started feverish
campaigning as the BJP’s Prime Ministerial candidate.
Samvat 2070 saw SENSEX and NIFTY touching life highs. SENSEX touched the
21000 mark, and the last time it touched that point was way back in January
2008. And the rally which began after September continued even after the
elections going all the way to 8200 levels in NIFTY in a short span of time.
SENSEX and NIFTY returned about 26% between last samvat and this one, making it
one of the best years in the recent memory.
Many of the frontline stocks returned anywhere between 50% to 100% over
the same period, giving rich dividends to the investors who stayed in the
markets during this period. While Foreign institutional investors (FIIs) made
the most of the returns during that period, retail investors stayed away from
the markets in utter disbelief.
Most analysts cautioned of irrational exuberance in the stock markets
around last Samvat and even the then Finance Minister warned the investors on
the similar tone. But eventually the FIIs poured money day after day in the
markets which swiftly recovered and touch new highs over the course of 12
months.
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What were the factors responsible for a robust Samvat 2070..?
Anticipation of change of government..!
* Huge FII flows
* Bottoming out of economic
crisis
* Recovery of Rupee
* Cheap valuation of stocks
* “Worst is over” mindset
* Robust global markets.
Samvat 2071..!
Samvat 2071 may not turn out to be as exuberant as the previous one, for
the simple reason that markets have run up quite fast and are already on
historic highs. Nevertheless markets can grow much higher from the current
levels, given the fact that many indicators are turning positive for the
economy.
To begin with, new government has started off well on the economic
front. Clear majority has given them the much needed political will to get
things done. Recent victories in Maharashtra and Haryana have given them the
short in the arm.
Fuel price de-regulation and coal block allocation are indications of
the many more economic reforms which are to follow in the coming months.
Global
commodity price correction, most notably the Crude price crash will augur well
for the country as it narrows the current account deficit and helps the rupee
to stabilize. Government has also cut diesel price which happens after 5 long
years. And that will positively impact inflation in the coming days.
Though we
have seen inflation coming down in the recent months, RBI wants to wait for
some more time to effect interest rate cuts, which can ignite the economic
growth revival. And that can take place over the year end or in the beginning
of the next year.
Any rate cut will propel the markets to fresh highs. Corporate earnings will
see a steady up move in the coming quarters, leading the stock prices to move
up correspondingly.
What are the pros and cons for the markets during Samvat 2071?
Pros -
* Key Economic indicators bottoming out
* Govt’s economic reforms
gathering pace
* Global Commodity prices cooling
off
* Inflation cooling off
* Corporate earnings picking up
* Possibility of interest rate cut
Cons -
* Slowdown of FII flows
* Fears of interest rake hike in
US
* Global economic uncertainty on
rise
* Geo political risks
While evaluating the pros and cons for the Indian markets, pros outweigh
the cons, though the risk of FII outflow will be a single big factor which can
impact the Indian markets negatively in the coming months. And in case of major
outflows, markets may correct sharply as seen in the past.
But overall, I
expect Nifty to settle around 9000 – 9200 levels during the close of Samvat
2071, provided the above discussed factors remain in place during the year.
Key sectors to watch out during Samvat 2071 -
* Private sector Banks
* Auto (4 wheelers and 2
wheelers)
* Auto Ancillaries
* IT
* Pharma
Select Cyclicals
What should the investors do?
* Do not time the market
* Stay invested in good companies
Invest in fundamentally good stocks whenever there are meaningful
corrections in the stock prices in the above listed sectors. As seen in the
last year, none of the analysts were able to predict market to move up from
5200 levels to 8200 levels between Sept 2013 to Sept 2014.
Do not get involved
in the game of timing the markets, as it will be a futile exercise. Markets are
in a sweet spot currently to give above average risk adjusted returns over the
next one year. The onus is on the investors to choose right stocks and to stay
invested.
Good Luck & Happy investing!!!
Happy Samvat 2071..
About the author..
Mr. V GOPALAKRISHNAN is FOUNDER & CEO at MONEY AVENUES, CHENNAI
Cell +91 9 55 11 55 11 6
+ 91 90947 95511
E mail; vgopal@gmail.com, moneyavenues@yahoo.in
(This article is taken From -
http://profitmantras.wordpress.com/2014/10/23/samvat-2071-equity-markets/)
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